My thesis is that we are in a bubble regarding auto loans.
Sure, cars are easily replaceable and hold no value close to real estate but hear this out:
Auto bonds' quality is lowering for each year meaning that the bonds are similar to the ones that eventually led to the crisis of '07. Apparently, many of the loans are either subprime or below optimal which in a dire situation stresses the bonds when rates are due. The amount of auto-loans given are also increasing for each and every year where fraud rates also are on a rise. Maybe the auto bonds aren't backed by billions of dollars in CDOs etc to really create a total collapse but I do theorise that banks are more vulnerable to the auto industry than we might think.
What makes my theory truly interesting is if you pair all this with the diesel crisis that may be on the way. In Sweden, Germany and the UK (just to name a few), we are seeing bans on diesel cars in certain areas and the use of diesel is being debated in the EU as I write this. If we look at a 5-year development, this might mean that those diesel cars funded by non-optimal loans will go down in value, essentially making these loans collapse.
To summarise, I think that it is easy to recognise the current auto-loan market as in quite a bad spot and if we then devalue the cars that are used as a security in these loans we might be heading towards something much worse than expected.
I would love to hear your opinions!
Submitted August 17, 2017 at 04:16AM by hazre1 http://ift.tt/2uSmh76
